Parties Cannot Invoke Arbitration Beyond Agreed Contractual Limits: Bombay High Court

The Bombay High Court has held that where an arbitration clause expressly limits who may invoke arbitration and the disputes that may be referred, parties cannot seek appointment of an arbitrator beyond those agreed limits.

Refusing to appoint an arbitrator in applications filed by individual members of a cooperative housing society, Justice Arun R. Pedneker observed, "In view of the specific arbitration clause and the limitations placed therein and the parties having agreed to refer only particular disputes to arbitration, all other disputes inter se between the parties will have to be adjudicated outside the process of arbitration."

The ruling came on applications filed by members of a cooperative housing society against Narang Realty Pvt. Ltd. The judge held that although the applicants were signatories to the redevelopment agreement, the arbitration clause permitted only the society and its members collectively, on one side, to invoke arbitration against the developer. Individual members could not invoke arbitration on their own.

The dispute arose from a redevelopment agreement executed on March 30, 2024, for redevelopment of the Asit Premises at Kane Road, Bandra West, Mumbai.

The agreement was executed between Narang Realty Pvt. Ltd. as the developer, the cooperative housing society and all its existing members. These included Usha A. Chandrasekhar, Pranjil Garhwal and the other applicants.

The applicants were dissatisfied with the sizes and locations of the parking spaces provided to them under Clause 4.2 of the redevelopment agreement.

On March 26, 2026, they invoked the arbitration clause contained in Clause 32 of the agreement.

Narang Realty responded by contending that Clause 32 did not permit individual members to invoke arbitration independently. The applicants then approached the Bombay High Court under Section 11 of the Arbitration and Conciliation Act, 1996. They sought appointment of an arbitrator.

Their applications followed an earlier order passed under Section 9 of the Act. In that order, the court had kept open their grievance regarding the sizes and locations of the parking spaces. It also observed that they would be at liberty to initiate appropriate proceedings, including arbitration, if permissible in law.

Appearing for the applicants, counsel argued that they were signatories to the redevelopment agreement. They submitted that this entitled them to independently invoke arbitration over disputes relating to parking spaces under Clause 4.2.

Counsel further argued that at the referral stage, the court was only required to examine whether an arbitration agreement existed.

Narang Realty, however, argued that Clause 32 restricted arbitration to disputes between the society and its members collectively on one side and the developer on the other. It submitted that individual members could not seek appointment of an arbitrator independently.

The court observed that there was no dispute that the applicants were parties to the arbitration agreement. The real issue was who the parties had agreed could invoke arbitration.

Referring to Clause 32, the court said the arbitration clause itself defined who could refer disputes to arbitration.

It observed, "The said Clause No. 32 provides that the Applicants i.e. the individual members of the society, cannot invoke arbitration against the Developer or the Society. The arbitration clause provides that only the Society and its members, on one side can raise a dispute against the Developer."

The court held that individual members could not invoke arbitration merely because they were signatories to the redevelopment agreement.

Justice Pedneker also relied on the Bombay High Court's decision in Ketan Champaklal Divecha v. DGS Township Pvt. Ltd. & Anr. The judge noted that the Supreme Court has granted leave against that judgment but has not stayed its operation. He reiterated that individual members remain free to pursue any other remedies available in law. However, they cannot invoke arbitration contrary to the contractual limitations agreed between the parties.

The applications were accordingly dismissed. The court left it open to the applicants to pursue such other remedies as may be available to them in law.

For Applicants (Usha A. Chandrasekhar & Anr. and Pranjil Garhwal & Anr.): Advocates Bhavik Lalan, Suraj Iyer and Gauri Joshi, instructed by Ganesh & Co.

For Respondent No. 1 (Narang Realty Pvt. Ltd.): Advocates Rohaan Cama, Pheros Mehta, Gaurav Gohal and Kanu Upadhyaya, instructed by Wadia Ghandy.

Appearances for Respondent No. 2 (Cooperative Housing Society): Advocates Rohan Sawant, Sahil Menon, Ishan Jha and Rutuja Joshi, instructed by Link Legal.